Likely, there’s never been a more critical time for investors to explore adding dividend stocks to their portfolios. With US inflation climbing 7.5% in January, according to CPI data, economists are becoming increasingly concerned about how long these rapid price increases will continue to erode purchasing power. While we don't know exactly when this trend will slow down, it makes sense to explore dividend-paying stocks that can help you lessen the impact of inflation on your financial picture.
Dividend stocks can outperform during periods of high inflation, and they are also typically less volatile than other investment options. One interesting way to gain exposure to dividend stocks is through the Dogs of the Dow strategy, which focuses on maximizing the yield of investments by owning the highest-paying dividend stocks in the Dow Jones Industrial Average. Dow Jones components are financially stable blue-chip companies, which means they can make for great long-term holds.
If you’re interested in exploring these types of equities, here are three dependable Dogs of the Dow to buy now:
1. Dow
When it comes to finding dependable stocks, it starts with a company’s business model and customer base. Dow Inc (NYSE:DOW) is a global company that produces and distributes a variety of chemical products, including polyolefins, Chlor-alkali products, and coatings.
These products are important in end markets like consumer packaging, infrastructure, automotive, construction, textiles, and more, which are the most important economic areas today. That should give investors plenty of confidence in this Dog of the Dow, particularly with many of these end markets in recovery mode following the pandemic.
Dow stock currently offers a handsome 4.52% dividend yield, and there’s a lot to like about how the company reduced its gross debt by over $2.4 billion last year. That means the chemicals provider has a better balance sheet in 2022 and can focus more on growing its earnings and rewarding long-term shareholders.
Q4 sales for the company grew by 34% year-over-year to $14.4 billion with improvement in all of the company’s different operating segments, which is another sign that this company could be in for a big year ahead.
2. Coca-Cola
This consumer staples stock has a lot of different factors working in its favor at this time, which makes for a compelling bull case. Coca-Cola Co (NYSE:KO) is the world’s largest soft drink company as well as the largest producer of juice and juice-related products.
It’s a stock showing major relative strength in 2022 and has been outperforming the major indices by a wide margin, which means there is plenty of demand for shares. This year, investors should be attracted to the company’s earnings prospects, as Coca-Cola’s on-premise sales are expected to bounce back with consumers heading back out into public settings to enjoy its tasty beverages again. In fact, Coca-Cola just beat consensus Q4 EPS estimates by $0.04 and announced that away from home sales topped 2019 levels for the first time since the pandemic started.
Investors should also be very interested in the company’s 2.75% dividend yield and that the beverage maker has boosted its annual payout for the last 60 consecutive years. That’s the type of consistency to bank on for the long term. Coca-Cola’s history of marketing excellence and potential for international expansion are additional reasons to consider adding shares.
While inflation could be a near-term issue that impacts earnings, the company focuses on cutting costs, improving productivity, and increasing prices to improve margins. This should ultimately result in a leaner and meaner company for the long-term, making this a strong pick to consider adding now.
3. Amgen
The biotech sector has been left dead over the last few quarters, yet that should dissuade investors from checking out this Dog of the Dow. Amgen (NASDAQ:AMGN) is a leading global biotech company with an attractive array of therapeutic drugs, including red blood cell boosters Epogen and Aranesp, immune system boosters Neupogen and Neulasta, and inflammatory disease drugs Enbrel and Otezla.
These best-selling drugs generate plenty of cash to cover the company’s dividend, although they could face some competition in the coming years. With that said, Amgen has some exciting new drugs in its pipeline and has been cutting costs heavily to invest in research and development.
The stock is also worth a look as it's trading over the 200-day moving average following a strong earnings release that saw Amgen deliver GAAP EPS of $3.36, up 22% year-over-year. The company also offers investors an attractive dividend yield of 3.27% and trades at a very reasonable forward P/E of 13.62. While biotech stocks have been ice cold, Amgen is still a high-quality company that investors can depend on over the long term.